Will Merrill Lynch cease to exist?
After acquiring Merrill Lynch and Co. four years ago, Bank of America Corp. says it is considering closing it down.
Bank of America says it aims to keep the brand name Merrill Lynch going, but plans to close down the entity by the end of this year.
Merril Lynch, the world’s largest brokerage, has more than 15,000 advisors and $2.2 trillion in client assets. It is the wealth management division of Bank of America.
Merril Lynch & Co. Inc. was acquired by Bank of America on September 14th, 2008, at the height of the financial crisis. In January 2009 it ceased to exist as a separate entity.
Merril Lynch’s head office consists of 34 floors of the Four World Financial Center building, Manhattan, New York City.
The Bank of America Corporation, which is headquartered in Charlotte North Carolina, is the second largest bank holding company in the USA by assets.
Bank of America says it aims to use the Merrill Lynch name in its investment and brokerage bank. The company says it will assume Merrill Lynch’s debt and obligations, including all its U.S. and foreign debt securities, according to a recent regulatory filing.
Brian T. Moynihan, Chief Executive Officer of Bank of America, has a cost-cutting target of $8 billion. He believes that merging the legal entity will help achieve this target.
Financial regulators want to make the larger banks easier to resolve in a crisis – if there is another financial crisis, a bank with a more simplified structure could be easily unwound if necessary. Mr. Moynihan believes that merging the legal entity is a step in that direction.
Merging its legal entity into Bank of America would mean that Merrill Lynch would no longer have to file separate financial statements with US regulatory agencies. Investors would have to look at the larger bank’s filings to find out what is going on at the unit.
Jerry Dubrowski, a spokesman for Bank of America, said:
“This will have no impact on how we serve our customers and clients and will have no impact on the Merrill Lynch branded businesses.”
Merrill Lynch’s takeover fraught with problems
Even since Bank of America acquired Merrill Lynch, it has been burdened with a series of problems.
Politicians and investors have attacked Bank of America, alleging that it did not properly warn shareholders about Merrill Lynch’s ever-growing losses before acquiring it for $18.5 billion.
In 2012, Bank of America paid out $2.43 billion to investors who had suffered financially as a result of the takeover.
Surge in investor confidence – says Merrill Lynch
Investors around the world have become considerably more confident in their outlook for growth, says a BofA Merrill Lynch Fund Manager Survey for August, 2013.
A net 72% of respondents had a positive outlook for the world’s economy over the next 12 months, compared to 52% the month before.
Investors’ major concern is whether China will have a “hard landing”. Only 32% expect China’s economic growth to be weaker, compared to 65% the month before.